Despite the current Department of Education’s move that rescinded an Obama Era rule that prevents student loan servicers from charging fees on unpaid student loans, two loan servicers are sticking with the old practice.
Last week, Great Lakes Higher Corporation & Affiliates and TG issued statements acknowledging the Department of Education’s change and saying that they wouldn’t be following the new guidelines. One of the key reasons behind such a move was the struggles faced by student borrowers.
“Many student loan borrowers already have a difficult time managing their loan obligations,” James Patterson, President and CEO of TG, in the company’s statement. “At TG, we want to help them successfully repay their student loans. Adding more fees does not help their situation.”
Great Lakes Higher Education Corp. & Affiliates also let it be known last week it’s not changing its policies, saying it hasn’t been charging borrowers seeking help collection fees since July of 2015. It remains to be seen if other student loan servicers will follow suit or starting charging for collections actions ahead of sixty days.
Earlier this month, the Department of Education announced that it is rescinding an Obama rule that prevents loan servicers from tacking on collection fees as long as the borrower is in repayment or rehabilitation within sixty days of default. The Department of Education threw out the law saying that “the Department thinks the position set forth in the DCL (Dear Colleague Letter) would have benefitted from public input on the issues discussed in the DCL. Accordingly, the Department withdraws the DCL, and the Department will not require compliance with the interpretations set forth in the DCL without providing prior notice and an opportunity for public comment on the issues addressed in the DCL.”
The move by the Trump Era Department of Education isn’t surprising despite the populist tone that President Trump struck on the campaign trail. Since winning the election, he’s sent a more pro-business message, choosing industry players for key positions on his team. He’s also calling for the undoing of many of former President Obama’s regulations; the DCL letter is one byproduct of this movement. Student loan servicers have been under attack, so they would most likely welcome any positive news. However, for the struggling borrowers, it creates the potential for more hardships.
On average, LendEDU found 11.8 percent of student loan borrowers are in default, amounting to more than 7 million Americans. Sixty percent of college graduates have student debt, and the nation now owes over $1.41 trillion in student loans. Student loan debt is preventing homeownership, car purchases, retirement savings, and the start of new businesses all of which have a negative impact on the overall economy in the country.
Author: Donna Fuscaldo
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